Q1 natural gas price $6.8 per unit by Ranga panel formula

New Delhi, July 5 (IANS) The price for natural gas in India for the April-June quarter of this year comes to $6.83 per unit, as per the government's new gas pricing policy, the petroleum ministry said Friday.

The June 28 approval by the Cabinet Committee on Economic Affairs (CCEA) of a new price for domestically produced gas was based on a formula suggested by the C. Rangarajan committee constituted by Prime Minister Manmohan Singh.

"As per the Rangarajan formula, the price will be fixed on the basis of average of netback price of Indian gas imports and also the weighted average of the price at international hubs (markets).

"On the basis of the said formula, the price for natural gas in India for the quarter April-June 2013 comes to $6.83 per MBTU (million British thermal unit)," said an oil ministry statement.

Netback price is an arrangement in which the price of gas at the well-head is based on that of the processed gas and then calculated backwards.

According to the ministry, during the circulation of its cabinet note, the Planning Commission suggested a price of $11.18 per MBTU, the finance ministry of $6.99 to $8.93 per MBTU, the Department of Fertilizer $6.68 per MBTU, while the power ministry wanted to continue with the cost-plus regime which comes to around $4.14 per MBTU.

The present price of $4.2 per MBTU was fixed in 2009 which is applicable till March 2014.

"However, the price of $4.2 $ per MBTU is not found to be viable for the sustenance of the domestic production of gas and all the operators are demanding increase in price," the statement said.

The Gujarat State Petrochemical Corporation (GSPC) has been demanding a price of $13-14 per MBTU for their blocks in KG D-6 basin in the eastern offshore. Reliance Industries Limited (RIL) has also been asking a similar price for their KG-D6 gas, the statement said.

"Even the public sector undertakings such as ONGC and Oil India Ltd have been repeatedly representing for increase in gas price as the production will not be viable at any price less than $7," the statement added.

The domestic gas production in the country has been falling drastically short of the demand and there will be huge dependence on the import of gas at much higher price of around $14 per MBTU and more, which will simply become unaffordable, the ministry said.

A major reason for weak domestic gas production is that the present price of $4.2 per MBTU has not been found viable.

According to the ministry, 3 trillion cubic feet of gas reserve in the country is waiting to be exploited.

The investment in exploration and development plan has been consistently going down, from $6 billion in 2007-08 to around $1.8 billion in 2011-12.

"At the same time, Indian companies have already invested $27 billion in the E&P (exploration and production) sector abroad and the remaining $10 billion is in pipeline," the statement said

Countering allegations that the new price would bring windfall gain to private operators, the petroleum ministry said more than 65 percent of domestic gas production is by the public sector companies and the remaining 35 percent by the private or joint venture companies.